It also creates a gusher of money for recycling into the global economy. This can pay for new technology and upgraded infrastructure, as well as to reducing government debt, meeting the rising costs of aging populations and funding better education and health care.

All of those, in turn, will generate their own positive externalities over time. In short, forcing dramatic change in the fossil fuel industry through proper taxation is highly profitable over the short-, medium and long term. Best of all the biggest elephant in the industry, Exxon, agrees.

Over the short term, higher carbon prices reduce negative behavior. This includes unfettered use of high emission energy.

Over the medium term, higher carbon prices will lead to more economic activity as the carbon tax funds are invested in new and societally beneficial growth industries rather than being sucked up by fossil fuel industry rent seeking.

Over the long term, the investments will generate ever larger environmental, social and economic dividends as their benefits compound.

Therefore, instead of seeing climate change as a problem, climate change needs to be seen (correctly) as the mother of all opportunities to change a pile of bad habits and make the world a much better place.

The above will be self-evidently obvious to all but those in the fossil fuel industry.

In the United States, profligate fiscal policy (including heaps of unwarranted subsidies to oil, gas and coal) are swelling the US debt-to-GDP ratio toward 100%.

This is occurring as an aging population is putting strain on medical facilities, while underfunded Social Security will go broke. Who comes first: fossil fuel interests, or people?

Carbon prices can help solve the problem, with money left over for investment in new technologies that in turn spur their own economic growth.

These result: the the next batch of Microsofts, Amazons, Apples and Googles. These will enrich investors.

With this amazing cornucopia of benefits, it often becomes hard to understand why there even exists opposition to higher carbon pricing. The only beneficiaries of the status quo are fossil fuel companies.

Another benefit of using carbon pricing to reduce emissions is that it helps the insurance industry. The increasing pace of climate disasters is costing the industry immensely.

If it keeps up, it will strain social stability.

Natural disasters made 2017 a year of record insurance losses.Source: Munich Re

When these are taken into account, LNG’s life-cycleenvironmental economics are worse than those of coal.

Unchecked, uncounted and unpriced, these emissions distort global energy markets so badly they’ll ensure uncontrolled climate change. The only way to fix this is to properly count and price these emissions.

Doing so reveals LNG’s true economic folly.

It will also ringfence value destruction by limiting it to feckless investors rather than society at large. The reason: LNG industryinvestors should have known this or should have asked — or worse — knew it, asked about it and then ignored it.

Below we make the case against LNG’s environmental economics through citing readily-verifiable, publicly-available sources.What they indicate is end-to-end carbon emissions from the global LNG trade are far worse than industry officials disclose.

For years, the half-truth spouted by the natural gas industry — and you still see it repeated virtually verbatim everywhere —is that Liquid Natural Gas is a critical transition technology to a clean energy future because natural gas is a low emission fuel.

That’s a lie atop a half-truth.

When combusted to make electricity, natural gas emits (estimates vary, but not by much) about 0.4 tonnes of carbon dioxide (and equivalents) per megawatt-hour of electricity produced.

Coal, by contrast, emits anywhere from about 0.65-1.1 tonnes per megawatt-hour, depending on the coal.

What these LNG figures artfully leave out are the sizable emissions in the LNG production and delivery chain.

These include emissions from extracting the natural gas from wells in the first place (including methane emissions, which aren’t counted), pipelining the natural gas to coastal ports, liquefying it into LNG, ocean shipping, regasification, pipeline delivery to power plants andthencombustion for electricity.

When these are added in — as they should be — the emissions of natural gas shipped to market as LNG to create electricity generates greenhouse gas emissions of around 600-700 kgs of carbon per megawatt hour. Natural gas all by itself emits about 400.Coal emits 800 or more.

That makes LNG only slightly better than coal in terms of carbon emissions at huge investment and environmental cost.

Below we present charts of LNG’s life-cycle emissions from different sources. We then combine these into a summary chart.

When this emissions difference is counted and priced, LNG’s environmental economics disappear. The upshot: investors have been suckered, markets distorted, the environment degraded and huge costs shoved on to future generations.

That’s hardly the definition of a clean transition fuel.

Below is a chart from the US Department of Energy (DOE). In a 2014 report, the DOE estimated LNG’s life-cycle carbon emissions of 600-800 kilograms of carbon per megawatt hour of electricity produced.

Source: “Life Cycle Greenhouse Gas Perspective On Exporting Liquefied Natural Gas From the United States, 2014,” US Department of Energy

That’s 50-100% higher than the 400 kilos of carbon emissions the LNG industry likes to use. The industry does thisby counting only the downstream combustion of natural gas. It simply excludes the upstream emissions of mining, compressing and uncompressing and transporting.

For comparison in the chart above, we added solar energy’s 40 kilograms (yes 40) of carbon on a comparable life-cycle basis, and wind’s tiny 12. These are an order of magnitude lower than natural gas, and 1.5 orders of magnitude lower than the life-cycle emissions of Liquid Natural Gas.

These are not one-off figures. They permeate research on the subject across the board. Take the US Office of Fossil Energy. It came up with life-cycle emissions of natural gas shipped to market as LNG of 630 kg/Mwh.

LNG Life Cycle Greenhouse Gas Emissions

Life-Cycle carbon emissions of 600-700 kgs per mwh result from natural gas electricity delivered to market as LNG.

Peer-reviewed research published in the journal Environmental Science and Engineering also has similar figures

LNG Life Cycle Greenhouse Gas Emissions

Research at Carnegie Mellon University came up with LNG emissions of nearly 900 kilograms of carbon per megawatt-hour. This research included the effect of uncounted methane emissions of LNG and their dramatic shorter-term global warming impact.

The Liquid Natural Gas industry lobby the International Gas Union sees things differently, standing alone in estimating the life-cycle emissions of LNG as much lower than anyone else.

LNG Life Cycle Greenhouse Gas Emissions

The International Gas Union claims LNG has only emissions of .6-.6 tonnes mwj. far belwo other estimates.

An outlier here, however, is the International Gas Union. This is the industry group that promotes the global LNG industry.

It puts life-cycle emissions at about 600 kg of carbon per Mwh.

Another interesting element is how the Liquid Natural Gas industry lobby the International Gas Union, sees things differently from other researchers. The IGU has the lowest estimate of greenhouse gas emissions.

With some variations, the above indicates general agreement on the scale of emissions from the LNG trade.

An outlier here, however, is the International Gas Union. This is the industry group that promotes the global LNG industry.

It puts life-cycle emissions at about 600 kg of carbon per Mwh.

Summary Emissions of LNG-Shipped Natural Gas

Low

High

Middle

US Dept. Energy

600

800

700

US Technology Energy Laboratory

575

725

650

Environmental Science & Engineering

600

800

700

International Gas Union

550

650

600

Average

585

715

650

Putting all these numbers together in place indicates a midrange of 575-725, or 650.

That’s a mere one-third reduction from coal and 50% higher than the emissions profile of natural gas combustion alone that the LNG industry universally cites. These figures also do not count methane emissions. Clean energy? It looks a stretch on the numbers.

This matters because the LNG industry has for years used such selective numbers to win regulatory, environmental and investment approval for a massive multi-hundred billion dollar global expansion with an amortization period stretching out to 2040 and beyond.

If this holds, it’s no exaggeration to say that 4c warming by mid-century is not implausible. Warming on that scale puts civilization in peril, all for the profits of a single industry.

Properly carbon priced, natural gas shipped to market as LNG is uncompetitive against wind and solar. In other words, pricing the now-uncounted carbon emissions of the LNG industry would provide sufficient funding to pay for both battery storage for wind and solar as well as climate adaptation investments now required by the lingering legacy of fossil fuels — of which LNG is just the latest incarnation.

Yes, carbon pricing LNG will raise the prices of electricity produced from natural gas. Destructive climate changes and destroyed coastal cities also will cost money. The issue is one of polluter pays.

Thirty-percent when applied to carbon prices will move upward the carbon-adjusted retail price of electricity generated from natural gas shipped to market as LNG. At present, coastal cities and global health care systems are paying these costs through more severe and damaging storms and treating the physical stress of record heat waves.

Paying these pollution costs through an $80 per tonne carbon price in 2030 (for example) would raise LNG-based electricity prices by 5.2c kwh. $100 carbon price will raise it by 6.5c. That would, in some cases, double the downstream cost of electricity generated from this fuel, bringing the cost of carbon adjusted LNG-produced electricity to 8-12c per kwh, compared to less than 5c/kwh in 2030 for wind and solar.

The difference between these two future prices, 5c and 10c is the implicit subsidy the LNG industry is getting.

As this is realized, markets will shift against LNG. Billions of dollars of global LNG infrastructure will prove uneconomic. When that happens, either the LNG industry will lobby government for assistance, or be forced into micro-economically draconian write downs of LNG capacity that never should have been built had prices signals not been distorted through uncounted carbon.

That’s only about 20-25% less than coal — at huge cost. Solar comes in around 40 kg per megawatthour. Wind comes in around 12.

In short, the fate of the Liquid Natural Gas (LNG) industry will determine whether humanity wins or loses its game of climate roulette.

If carbon pricing expands and prices rise, the world will be propelled toward a cleaner, more prosperous, peaceful future. Done carbon pricing is done badly — or worse — not at all, civilization will come undone.

LNG is a bad technology entrenching itself at the worst possible time. A few simple graphs make the case.

The universal mantra of the $90 billion LNG industry is that LNG is a desirable technology because natural gas is a low emission energy source. That’s disingenuous to the point of being an outright lie.

LNG, narrowly defined, is a $90 billion industry, but that doesn’t include a host of other associated industries.

Donald Trump’s US presidency may push the United States to split into two independent countries.

Donald Trump may be pushing America’s left-leaning and right-leaning states to split.

One could be comprised of 22 of America’s economically and politically progressive coastal, midwestern and mountain states and Hawaii.

It might be called Califowne+, standing for California, Oregon, Washington, the Northeast, plus a few other states.

The other could be comprised of America’s midwestern, plains and mountain states plus Alaska. That one could be calledHomelandia.

California’s planned referendum next year on leaving the 50 state union — known as Calexit — could mark the starting point down this road.

Over the past 40 years, two ideological halves of the United States have grown ever further apart. A split would give greater political coherence to both sides. America’s Declaration of Independence sums up the rationale:

‘In the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, (a) separate and equal station.”

Initially, at least, Homelandia and Califowne+ would start separate lives as rough economic and population equals. Both would be $8-10 trillion economies.

While each would be smaller than China’s economy, each would be double the size of third-tier economies like Japan and Germany.

Splitting the United States into Califowne+ and Homelandia would allow each of the two new nations better internal political and economic focus.
Califowne+, for instance, could develop its economy through an economic ‘comparative advantage’ strategy.

This could be based upon intellectual property, open inquiry, science, reason, trade, development of carbon markets and international political and economic engagement.

This could be based upon closed borders, reduced trade, a primacy of church in state affairs, capital punishment, teaching creationism in schools, open carry gun laws and elimination of background checks, state control of reproductive rights and abolishing limits on carbon emissions.

Markets could do the rest.

Califowne+ could expand and deepen trade and political links with Canada, Mexico, the European Union and China in investing billions of dollars to spur tomorrow’s new intellectual property industries.

High on the list: implementing carbon prices of $50-100 per tonne over the next 10-20 years. This would throw off trillions of dollars for reinvestment in the industries of tomorrow.

This would spur economic growth and enable Califowne+ plus to pay down its $10 trillion share of America’s current national debt, which would be split in half under the divorce.

Homelandia, meanwhile, could either renege on its debt or inflate it away.Homelandia also could impose capital controls, deepen state control of the economy and end external trade using the Argentina model as a blueprint.

Homelandia would in the split gain control over much of former United States’ oil shale and gas reserves.

This would makeHomelandia self-sufficient in energy. And since Homelandia wouldn’t be able to trade those fossil fuels international due to high carbon tariffs, Homelandia could use these stranded resources to remain self-sufficient in energy for decades to come.

Next year’s 2018 mid-term US elections and the proposed ‘Calexit’ vote will provide initial clues on the potential for the outcome laid out above. The 2020 presidential elections will be critical as well.

If the United States is now a chain-ganged coupling of incompatible subnations, splitting the two in half could enable both sides to thrive.

Carbon pricing’s lost decade and half (2006-2020) will cost the world dearly.

In 2006, some of the earliest traded carbon prices (in the early days of the European Union Emissions Trading Scheme) reached US $36 dollars. That price is around the level experts argue is needed to reduce climate change to manageable proportions by 2050.

Unfortunately, since 2006 prices have gone in the other direction. Most now linger well below $10.

The problem is due to too many carbon emission permits. Market reforms planned for around 2020 may fix this in part, by reducing the number of permits in circulation or creating floors below which prices can’t fall.

At best, it all means a ‘lost decade’ in reducing destructive climate change. This will negatively affect the quality of life on the planet for the rest of the century. What’s desperately needed is transparent, predictable pricing upon which to base future investment plans.

Forecast Carbon Market Prices to 2050

Overallocation of carbon emission permits has caused prices to fall. Restriction of supply and annually-escalating minimum prices after 2020 will bring carbon markets back to life. As this occurs, it will generate the funds needed to invest in clean energy.Sources: Carbon Pulse, RGGI, State of California, Synapse, US GAO, ICIS, Energy Aspects

This 15-year carbon price sleepwalk represents a lost decade and half. During this time, escalating carbon prices could have been progressively decarbonizing the world economy, paying dividends by now.

This would have included faster economic growth and greater accumulation of needed savings to meet the health care and retirement needs of an aging global population.

The US General Accounting Office has estimated the ‘social cost’ of carbon of around US$20, a figure private industry largely agrees with. The sooner this prices achieved, the sooner the financial system can play its role shift funds from fossil fuels to cleaner energy sources.

Had 2008’s $36 carbon prices persisted,the world economy might not now be stuck in a slow-growth phase.

The reason is that carbon prices and elimination of carbon subsidies would have fueled a huge investment boom. This would be paying dividends by now. These would include lower health and insurance costs from air pollution and less severe storms.

At $5.3 trillion, global fossil fuel subsidies now amount to 6.6% of the global economy, or US$132 per tonne, and are increasing by 9% per year. Source: “How Large Are Global Energy Subsidies?,” IMF Working Paper, May 2015

Instead, perverse pricing is perpetuating the problem. At present, fossil fuel subsidies amount to $213 per tonne of carbon.

Carbon Subsidies

Total

Per Tonne

Fossil Fuel Subsidies (US$ millions)

$5,300

$133

Health Impacts (US$ Millions)

$3,200

$80

Total

$8,500

$213

Taken together, fossil fuel subsidies and the health impacts
of climate amount to roughly $8.5 trillion dollars, or about 10% of
the global economy.
Source: “How Large Are Global Energy Subsidies?,”
IMF Working Paper,May 2015

Better carbon markets, fiscal reform, financial and technical innovation. That’s the solution. Undertaking these reforms, the sooner the better, will set the stage for a long economic boom that can solve many of the world’s problems.

The most important of the three changes is eliminating today’s US$5.3 trillion of annual world fossil fuel subsidies. The Group of Sevenhas pledged to do that for the world’s largest economies by 2025. The rest of the world can follow. Everyone will gain.

The second is to raise carbon prices on the world’s 40 billion tonnes of annual emissions from $3 per tonne (the current weighted average) to $50 per tonne.

Fifty dollars a tonne is a future level many energy corporatesalready budget for in the future investment planning.

These reforms will more than pay for themselves. When finished repairing the damage of climate change, they can be applied to paying for an aging global population.

Consider some numbers:

By 2031, eliminated fossil fuel subsidies will free up $5.3 trillion. By that year, falling health costs of dealing with climate change will yield another $1-2 trillion in savings. Raising carbon prices to $50 per tonne will free up another $2 trillion.

Together, these policy changes and their economic benefits will free up $9 trillion a year (roughly seven percent of the world economy) to better uses.

After that, revenue will fall as fossil fuel subsides will hit zero and shrinking emissions yield smaller and smaller carbon revenue. Even with this shrinkage, however, reforms will still produce annual redeployable capital of roughly five percent of the global economy in 2050.

Rising territorial tension in the South China Sea, for instance, can be viewed as abattle over dwindling fossil fuel resources.

China’s ambit claim Nine-Dash line in the South China Sea and its rejection of UN Tribunal jurisdiction in the sea also can be seen this way.

So can China’s recent placement of high-tech oil exploration equipment in waters claimed by Vietnam, as can China’s ham-fisted effort to auction off oil and gas exploration blocks in waters claimed by Vietnam.

Over time, redeployable capital created by properly pricing climate change can be plowed into infrastructure to raise economic growth. This will raise the global economic growth rate, reducing the medium-term drag of higher carbon prices and eliminated price subsidies.

Never in the history of economics has a global macroeconomic problem presented such a clear and unambiguous set of policy solutions.

The policy mix is clear. The world needs certainty. Eliminating fossil fuel subsidies and creating a multi-decade rising price curve for carbon will enable clearer discounting of future investment.

For their part, fossil fuel subsidies can be reduced on a straight line basis. Achieving predictability in carbon levies can be achieved through carbon trading applied to an ever greater proportion of carbon emissions coupled by a minimum floor price below which carbon prices can’t fall.

This has been the fatal flaw of carbon markets to date.

To fix this, forward-looking jurisdictions like Alberta, Canada are now considering hybrid systems of floating carbon prices underpinned by a minimum price. Australia implemented such a system briefly and may resurrect it.

The European Union is well aware of the minimum price problem. The EU almost certainly will include that in 2020 reforms to the European Union Emissions Trading System (EU ETS). China’s also taken note, and plans to incorporate price floors into its various regional carbon trading markets.

With greater policy certainty such as the above, carbon futures markets can allow better management of private risk. America’s NASDAQ already offers futures contracts out to 2020 on the EU ETS. Longer-dated futures will no doubt be introduced after the EU ETS’s 2020 reforms are agreed.

China also is working on a regional futures exchange. Economic reform coupled with zero sum financial market risk management products can solve climate change with capitalism.

Climate changehas been the devastasting result of a failure to apply orthodox economics.

Could a United Nations’ South China Sea tribunal rulingwreak havoc upon the Asian Infrastructure Investment Bank (AIIB)’s official coming out party.

The Asian Infrastructure Investment Bank (AIIB) should fund development of the proposed Trans-ASEAN Gas Pipeline (TAGP) to calm worries over Chinese territorial claims to the entire South China Sea.

Any time now, the UN Permanent Court of Arbitration could hand down a decision on the Philippines’ appeal against China’s territorial claims to virtually the entire South China Sea.

Meanwhile, the newly-created AIIB holds its inaugural annual meeting June 25-26 in Beijing. Beijing has invested immense national prestige in the new bank.

The tribunal’s decision will almost certainly test China’s political finesse. That’s because China has repeatedly said it won’t accept a UN ruling that goes against it.

The problem there is that the AIIB’s success may hinge on how it navigates its way through tricky political issues such asthe South China Sea.

This uncertainty is creating disquiet about China’s commitment to multilateralism — of which the newly-minted AIIB is intended to be a China’s commercial symbol.

To date, the six-month old AIIB has been at pains to portray itself as a new multilateral economic institution governed by written rules and not merely a politically-manipulable foreign economic policy puppet of China.

To get a better idea of China’s looming political-economic conflict here, consider the AIIB’s Articles of Agreement.

In them, the AIIB pledges it will ‘not take a position on territorial claims’ (Article 13, paragraph 4), and that for projects in disputed areas ‘member consent is obtained,’ (Article 13, paragraph 4) and that it will ‘not undertake financing in the territory of a member if the member objects,’ (Article 13, paragraph 3).

The bank further promises that ‘only economic considerations shall be relevant’ (Article 31, paragraph 2) and that it ‘shall not interfere in the political affairsofanymember,norshalltheybeinfluencedintheirdecisionsbythe political character of the member concerned.’

All of this matters because deeply-needed infrastructure investment in Southeast Asia — particularly offshore infrastructure — is likely to require interconnection though territorially disputed areas.

Naturally, early infrastructure projects funded by the AIIB in Southeast Asia will likely be things like roadways, rail and airports exclusively with single national borders. But Asia’s real need is for cross border infrastructure — particularly for energy and especially offshore.

Of this latter class, the 10-member Association of Southeast Asian Nations (ASEAN) has developed two highly promising projects.

These are the Trans-ASEAN Gas Pipeline (TAGP)and the Trans-ASEAN Electricity Grid (TAEG).Both are aimed at more deeply interconnecting the energy economies of ASEAN’s states, including across the South China Sea to Indonesian Natuna, Malaysian Borneo and the Philippines.

The TAGP and TAEG projects were first devised nearly a decade ago. The estimated cost of both is $13 billion. Together, they offer an ideal opportunity for the AIIB to make a dramatic entrance onto the global infrastructure investment stage.

The problem, however is that the projects could find themselves subject to territorial claims on terms set by China’s Communist Party, not the AIIB’s Articles of Agreement.

This puts the AIIB in a very sticky position if — as expected — the UN Panel in the Hague rules China’s Nine-Dotted Line ambit claim to the entire South China Sea incompatible with international law.

In that case, the AIIB would need to declare which comes first in its deliberations: itsown Articles of Agreement or the edicts of the Communist Party.

For the AIIB’s other shareholders, two strategies look possible in a case like this. One’s aggressive, the other cautiously promising.

The first would be to force demonstration votes among AIIB shareholders that China could overrule by veto,but at a political cost to China.That’s an unattractive outcome all around.

The second would be to encourage agreement between China and her Southeast Asian neighbors on Joint Development Areas (JDAs) in the South China Sea.

All sides in the South China Sea pay lip service to ‘joint development’ of offshore oil and gas in disputed areas. The problem is that interpretations differ on the definition of ‘joint development.’

But at its most reductive it means cooperating to develop resources in disputed areas while indefinitely postponing final settlement of disputed claims.

Based upon that understanding, the AIIB could fund construction of the TAGP to increase cross-border gas flows between ASEAN nations and China. All sides benefit.

This, in turn, would open the way for bilateral agreements (Philippines-China, Vietnam-China, for instance) to be negotiated on joint development of disputed area oil and gas fields (around Reed Bank and Triton Island, for instance). These could then be delivered to market through the TAGP gas delivery infrastructure.

Later, other JDAs could be established, such as in the Tonkin Gulf,Scarborough Shoal and Natuna Island.

These in turn could then be connected to each other and to downstream regional markets through AIIB-funded infrastructure.

JDAs and cross border energy infrastructure have pedigree elsewhere in the world. Highly-successful JDAs exist in the Middle East, the Caribbean and the Gulf of Thailand.

And highly-successful cross border energy infrastructure projects have been completed in the North Sea, the Gulf States in the Middle East and elsewhere.

As China emerges on the world stage,theAIIB emerges as a new financial institution and Asia emerges as the world’s largest regional bloc, the ideas above offer a constructive pathway to avoid war over rocks and reefs in the South China Sea that could escalate into something larger.

JDAs enable all sides the ability to claim victory. China can say it’s not climbing down on its 9-dotted line but is dealing with territorial claims bilaterally. The rest of the world can claim China has backed down. Everybody wins

In 20 years, no one will care. At that point, all sides will say they prevailed. And they will have. Collectively.

As the world economy grapples with deflation, spending big on infrastructure could be just what’s needed.

Expanding cross-border electricity links in coming years will largely follow the pathways laid down by fiber optics since the 1990s.Sources: State Grid Corp of China, Siemens, Institute of Electrical and Electronics Engineers (IEEE), Grenatec, North Sea Offshore Grid Initiative and others.

Funded by central banks, it would be ‘monetized infrastructure investment.’ A more colloquial name would be ‘infrastructure helicopter money.”

The impact would be the same. The investment would spur demand across a host of industries.

It would create badly-needed global economic growth through government spending and its multiplier effect. The long-term bonds created to fund it could then be distributed to government retirement schemes.

There, the bonds would generate the future repayment streams needed to fund the looming public retirement obligations. These are now met via increasingly unsustainable ‘pay-as-you-go’ schemes.

The good news is that government infrastructure investment creates future revenue streams. Government retirement obligations create future revenue outlays. They just occupy opposite sides of the ledger.

Infrastructure and retirement needs are easy to forecast up front. At present, both are underfunded. Supplemented by carbon prices, the benefits of monetized infrastructure investment compound. The results: improved fiscal solvency, a solution to underfunded government retirement programs and a more efficient global economy.

The proposal here is for nothing short of a post World War II Marshall Plan or 1960s-era moon shot for energy. This time, however, the aim would be to solve climate change and fund the needs of an aging global population instead of rebuilding shattered countries from global war.

Since the 1990s, wiring the world with fiber optic cables and developing a common protocol for packetized information transfer (aka ‘the Internet’) has revolutionized global communications. It’s spawned wealth-creating industries and sped up the innovation cycle.

More deeply linking the world for energy — primarily electricity and liquid/gaseous natural gas/hydrogen — will create the kind of common protocols for transmitting energy from place to place that uniform data packets created for moving information.

In other words, ‘helicopter infrastructure expenditure’ represents a ‘Gaia Hypothesis’ (ie a self-healing system) solution to climate change and aging demographics. The challenge now is to seize the opportunity. The timing is right.

Global economic experts ranging from former US Treasury Secretary Larry Summers to major international banks now argue a major reorganization of the global economy is now needed. This would focus on investment and decarbonization.

The core institutions are in place: the Asian Infrastructure Investment Bank (AIIB), the Asian Development Bank (ADB), the World Bank, the International Energy Agency (IEA), the World Trade Organization (WTO) and others.

What’s needed now are common standards and universally-applied carbon pricing. These will provide the right signals for investment. Stated conversely, climate change represents a failure to correctly price carbon. Rising sea levels and more destructive weather are the paybacks of this ‘market failure.’

The place to start is Asia. There, the world’s largest regional economy is taking shape. It includes China, South Korea, Japan, the Association of Southeast Asian Nation(ASEAN) states, Australia, Papua New-Guinea and East Timor.

Together they represent the world’s most dynamic regional economy. Much of the region is being built out with infrastructure for the first time: power lines, gas pipelines, roads, rail and telecommunications.

The challenge now is to create the technical and marketplace standards to encourage interconnection and to create aggregated, cross-border markets governed by pan-Asian demand-supply price signals for carbon-adjusted energy.

Properly run, China’s AIIB can be in the forefront here — at least over the short-term. The AIIB already has announced two cautious initial infrastructure projects — both roadways.

Future projects — planned for the longer term, should include deepening electricity and natural gas interconnections between China, Japan and South Korea in Northeast Asia and China, the ASEAN states and Australia.

The Pan-Asian Energy Infrastructure emerging from this would include Joint Development Areas (JDAs) in the South China Sea.

Grenatec has proposed a series of South China Sea JDAs offering a template for this kind of bright future. These would connect promising offshore oil and gas fields to land and sea-based gas pipelines and power lines delivering their low-emission energy to downstream markets in the form of natural gas, electricity or hydrogen.

The model could then be extended southward to Australia and north and west to Russia,central Asia and eventually Europe. What’s needed now is to mesh all the good ideas for global infrastructure into a financial plan of investment to create the 21st Century global clean energy economy.

In the next five years, global carbon market reform will deliver broader coverage and much higher prices (to $20-$50 per tonne). These will expose LNG’s poor carbon economics.

Fourth, capital costs of pipelines are lower than for LNG. For intra-regional transport of natural gas, pipelines represent a better deal on both economic and technology grounds. Government capture– however — tilted decisions toward more LNG, a more lucrative business for industry.

That bet’s now going wrong. The result is an albatross industry. The evidence:an oversupplied regional Asian LNG market where spot market prices have fallen so low they now more than offset financial penalties of failing to honor long-term delivery contracts.

That, in turn, is rapidly breaking down the industry’s preferred sinecure of long-term pricing.

It’s the horror scenario for LNG insiders who deliberately excluded key variables from their economic analysis. These include carbon pricing and the advantageous multi-fuel advantages of pipelines.

The current mayhem will mark the evolution of a regional LNG spot market priced on ‘demand pull’ signals generated by consumers instead of ‘supply-push’ factors favoring producers. That’s the market Asia should have gotten all along.

In response, some LNG shipping capacity and upstream natural gas production will be mothballed. This is already happening in Australia’s overbuilt LNG export port of Gladstone, Queensland.

Billions in write downs will follow over time, revising downward future calculations about the intra-Asian LNG market’s economic value. That will lead to consideration of alternative delivery methods for natural gas that are less capital and carbon intensive.

An ideal new system would enable natural gas to be ‘pulled’ into the market as needed in response to demand instead of ‘pushed’ into the market by companies with expensive, bespoke, infrastructure to pay off.

The problem is one of vertical integration. LNG producers mine the gas, build the LNG shipping facilities and LNG ships. They’ve bet the farm on everything going right with all three all the time.

By contrast, an open-access, common-carrier, multi-fuel pipeline would be built, operated and maintained by an unrelated middle party. Financing of natural gas transport would be divorced from the economics of upstream production and downstream sale.

A pipeline would sell access to all comers, changing transport prices in response to market demand. The example here is the United States. There,an open-access, common-carrier merchant pipeline network is open to all comers.

It features its own ‘spot’ market price (aka the Henry Hub)quoted on a day-to-day, moment-to-moment basis.

The future of global energy markets lies in networks such as this. They have proved themselves in telecommunications (the internet), electricity (Europe’s increasingly integrated grids) and now natural gas (the US merchant pipeline system).

Furthermore, ‘just in time’ inventory management lowers the albatross of idled, high-fixed cost investments — such aslong construction lead time LNG facilities that are under utilized once finished. The only winners of that game are construction contractors.

This generates much better price signals than 20-year lock in, the model favored by the LNG industry on the grounds such certainty is required to justify large initial investment.

May 2016 marks the 10-year anniversary of Al Gore’s film ‘An Inconvenient Truth.’ Gore’s film brought climate change to the world’s attention.

Between now and 2050, the battle against climate change will be won through carbon pricing, energy market reform and an interconnected global energy grid.

Since then a lot has changed – for the better.

Carbon pricing has been introduced. Over time, coverage will expand and prices will rise.

Trillions of dollars of perverse fossil fuel subsidies are coming under scrutiny. Over time, these subsides will be eliminated. This will shift investment from cheap dirty energy toward better, cleaner sources.

Renewable energy technology is improving very rapidly. This is creating a positive spiral of lower costs, increased demand and further take up.

It’s all happening at quickening speed. In a recent TED talk updating ‘An Inconvenient Truth,’ Gore’s argued the battle against climate change is now being won.

There is, however, still a downside.

Since 2006’s release of ‘An Inconvenient Truth,’ annual global carbon emissions have increased to early unprecedented levels. This is making the future behavior of Earth’s atmosphere harder to confidently model.

Recent heatwaves and warm winters are unprecedented. Storms are becoming stronger and more destructive. Ice sheets are shrinking at unprecedented ratesClearly, there is much work to be done.

But don’t underestimate the power of technology and societal change. Between now and 2040, global warming will worsen while carbon reduction solutions ramp up.The next 25 years will present the ultimate danger zone for the planet. Hard times lie ahead.

The reason: much of the past 10 years has been squandered fighting rear guard actions by fossil fuel interests denigrating scientific reality, Now that two of America’s biggest coal companies have filed for bankruptcy, things may change. As these albatrosses kill themselves off, technology and economics will come to the rescue.

The inspiring precedent is the computer age.

Over just 30 years, the internet (technology), the breakup of telecommunications monopolies (economic reform) and the spread of the mobile phone (market innovation) have changed human existence for the better.

In the next 30 years, the same process will occur with energy. During this time, a global energy grid will emerge (the technology), decentralized merchant energy production bought and sold in real time markets (economic reform), and micro-scale energy solutions linked to centralized marginal supplies (the conceptual equivalent of mobile phones).

The technology is in place. The plan is in place. The will is there. What’s needed is the economic plan.

What the world needs now is more than just zero interest rates create economic growth and avoid recession and deflation to take hold

Over the next 30 years, the world needs is a massive infrastructure investment plan to create a global energy grid. This grid will carry electricity and hydrogen from anywhere, to anywhere. Doing so will pull the global economy out of deflation.This will stimulate economic demand through large-scale infrastructure investment followed by the massive market efficiencies it creates.

Over time, the plan will pay for itself. Through taxing carbon and eliminating fossil subsidies, trillions of dollars can be freed for building the global clean energy infrastructure of tomorrow. Building this infrastructure will create a massive global economic stimulus with a powerful muliplier effect.

Given that such investment — properly constructed — can last a century or more, building it can create the long-lived investment repayment flows that can fund the huge looming costs of an aging global population.

The result will be a richer, healtthier, more peaceful, more economically effcient global economy at less existential risk.

Between now and 2020, the world should negotiate the pathway to a global energy grid by 2060. Already, template plans exist. These can be built out in stages. They could start with domestic infrastructure upgrades, followed by cross border interconnections, intra-regional interconnections followed by inter-regional network integration.

This was the template the Internet gave us. We should now apply it to energy.